Malaysian manufacturers see recovery in June

KUALA LUMPUR (July 1): Malaysia's manufacturing sector returned to growth during June as lockdown measures aimed at stemming the spread of the coronavirus disease 2019 (COVID-19) were partially lifted.

According to IHS Markit, output grew at the joint-fastest rate in the survey history as an increasing number of businesses across the country restarted their operations.

It said that encouraged by signs of a recovery in its infancy, business confidence rose to a four-month high, reflecting more upbeat expectations towards market conditions over the coming year.

The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose sharply to 51.0 in June, its highest since September 2018.

This was up from 45.6 in May, indicating an improvement in the health of Malaysia's goodsproducing sector and stronger economic growth more generally.

IHS Markit said central to the pick-up in business conditions was a jointrecord rise in manufacturing output levels.

It said according to panel comments, the partial lifting of lockdown restrictions enabled factory operations to restart, and also led client demand to increase in many instances.

IHS Markit said there were encouraging signs that demand conditions were beginning to stabilise during June, with the New Orders Index rising to a six-month high.

It said the re-opening of certain industries reportedly led new work intakes to improve.

That said, overseas demand remained particularly fragile, weighing down total order book volumes.

Although the rate of decline in new export sales has eased considerably since April, international market demand was reportedly subdued by the ongoing COVID-19 pandemic.

IHS Markit said looking ahead, the manufacturing sector outlook improved once again in June.

It said business confidence strengthened to a four-month high as firms became increasingly confident that production would rise from its present levels in the year ahead.

Optimism was linked to expectations of a recovery in economic activity.

IHS Markit said the latest survey data meanwhile highlighted broadly neutral levels of outstanding work across the Malaysian manufacturing sector, suggesting that operations were being effectively run to match business requirements.

Consequently, staffing levels were held nearly stable.

Some companies moved in retrenchment mode as businesses adjust to new production schedules.

Malaysian manufacturers continued to report slower input lead times in June.

Transport restrictions relating to the COVID-19 pandemic exerted further pressure on vendors.

There were also reports of suppliers facing large backlogs following the easing of some lockdown measures.

IHS Markit chief business economist Chris Williamson said the Malaysian manufacturing sector showed encouraging signs of recovery in June.

He said output rose at a rate unsurpassed in the survey’s eight-year history as increasing numbers of firms reopened facilities or raised factory operating capacity after COVID-19 related disruptions.

Such a rapid turnaround in production since the severe collapse in April bodes well for a v-shaped recovery, he said.

"However, a sustained recovery is by means assured, and growth could easily lose momentum after the initial rebound. While business expectations continued to improve in June, confidence remains well below levels seen at the start of the year, in part reflecting worries about the impact of ongoing COVID-19 restrictions on demand, both at home and abroad.

“Weak export demand remains a particular concern, especially in terms of subdued consumer spending.
"For now though, the data are moving strongly in the right direction and, barring any second waves of infections, a recovery is evident,” he said.

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